Question

The amount of earnings distributed to stockholders can be found in the income statement.

Sally's Choice sells season memberships for $200 each. During January 2017, 60 season memberships were sold. As of March 31, 2017, $3,000 of season membership fees had been collected from customers. The season runs for four months starting March 1, 2017. Which one of the following is an amount reported on the financial statements for the period ending March 31, 2017?
Unearned membership revenue of $3,000
Unearned membership revenue of $9,000
Accounts receivable of $3,000
Membership revenue of $9,000
False

Answer 1

Unearned membership revenue of $9,000

Step-by-step explanation:

The sales on credit during January 2017 was valued at $12,000 ($200 x 60).

In March 2017, customers paid $3,000, leaving the balance of $9,000 outstanding.

Since the season for which sales and collections were made starts March 1, 2017, when reporting the financial statements for the period ending March 31, 2017, the Membership Revenue would be $3,000 only and the balance $9,000 would be reported as Unearned Membership Revenue in the Balance Sheet with a further $9,000 reported in the Accounts Receivable to balance the records.

This shows that Unearned Membership Revenue of $9,000 is the only valid statement.